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« December 2006 Table of Contents

Gulf Coast seafood industry still trying to recover

Louisiana oyster farmers are pursuing a group crop insurance plan to help avert future financial ruin

Continued from cover

A s Hurricanes Katrina and Rita lashed against the Gulf Coast last year, the region's fishermen and shellfish growers hoped their families and loved ones, not to mention their boats and oyster beds, would survive the colossal storms. After the hurricanes passed and the damage could be measured in dollars, the Gulf seafood industry faced the question, "Where do we go from here?" Fifteen months later, many harvesters and processors are still looking for the answer.

This summer, Congress approved a $94.5 billion war and hurricane-relief spending bill that included about $20 billion for the Gulf region. However, the aid package that earmarked $127 million in grants for rehabilitating key fishing and shellfish-cultivation areas was just a drop in the bucket compared to the $1.1 billion that the five Gulf Coast states initially sought to help repair the damage to their seafood industry - one that lands about 1.5 billion pounds annually, or about 15 percent of the nation's seafood landings.

The grants will certainly help repair shellfish grounds that have been cultivated by generations of harvesters and processors. But the industry knows it must plan ahead to avoid a similar fate in the future: Processors are building new facilities inland; federal aid is improving communication with emergency response teams and health inspectors; and oyster farmers are hoping a group insurance plan can avert financial ruin if their crops are destroyed.

But without direct assistance, a lot of the region's proud shrimpers, processors and oyster farmers feel like yesterday's news.

"We've been abandoned," says oyster farmer and shrimp fisherman George Barisich, who also serves as president of the United Commercial Fishermen's Association in New Orleans. Barisich quickly points out that of the total $150 million industry aid package, nothing went directly to fishermen, yet more than $20 million was directed to the National Marine 
Fisheries Service to restore its laboratories and improve its hurricane-damage reporting abilities.

"W e've been paying taxes, stimulating the economy and doing good business for generations," says Barisich. "But when we need it the most, when we need a little help, we didn't get it. It's just sad."

"Not a penny came to any of the fishermen hurt by the hurricanes," says Bob Jones, executive director of the Southeastern Fisheries Associa-tion of Tallahassee, Fla. "We were left out of the formula. All the recovery is being done by the industry with no help from the state and federal governments. And we don't have the political clout to do anything about it.

"The [fishermen] who can afford to stay in will make it, because they're not used to getting any help from anybody."

Needless to say, it's been a slow healing process in the Gulf; fishermen fear their way of life is at risk. Ewell Smith, executive director of the Louisiana Seafood Promotion & Marketing Board in Metairie, La., confirms that about 60 to 70 percent of the state's fleet is fishing again. But it took a lot of time, he says, and it will take a lot more for the industry to fully recover.

"Fishermen aren't looking for handouts," says Smith. "Let's help these folks get their boats back in the water. That's what they want to do. They want to fish, and we want to put them back to work."

To the rescue

Help has come to commercial fishermen in some unexpected ways. In August, Shell Oil donated $500,000 to the Louisiana Wildlife & Fisheries Foundation to purchase, deliver and install two 20-ton-capacity ice machines for St. Bernard Parish and open an industrial icehouse in Cameron Parish. Hurricane Katrina hit both fishing areas hard and the severe ice shortage and reduced storage capacity hindered the distribution of seafood beyond the docks.

"You could just see how incredibly grateful people were and the immediate impact in those communities," says Smith, adding that the ice is being given to fishermen for free. "It will stimulate a rebirth in these areas."

The entire food industry in the Gulf region continues to struggle. According to Share Our Strength, which works to end childhood hunger in America, less than half of the restaurants in the New Orleans metropolitan area have reopened, and most remain severely understaffed. Share Our Strength organized two "Restaurants for Relief" dine-outs, one in September 2005 and another on Aug. 28, during which hundreds of restaurants across the country donated a portion of their proceeds to aid recovery efforts for the area's foodservice industry. The two events raised about $1.5 million for area schools, community kitchens, food programs, farmers markets and restaurant and hospitality workers.

Because the Gulf Coast is so closely tied to seafood - gumbo, shrimp Creole and crawfish boils are a way of life - the industry's recovery is essential to the economy and the culture. In the months after Katrina, the industry's mettle was tested on the waterfront, where the major needs were time, money and helping hands.

Facing a massive cleanup operation, seafood and commercial fishing associations from Texas, Loui-siana, Mississippi, Alabama and Florida each submitted Community Development Block Grant (CDBG) requests to the federal government for infrastructure repairs. Not only were boats destroyed and offices flooded, but the shattered remains of people's homes clogged the region's waterways and landing docks with debris.

"Even now, some boats remain tossed on land," says Eddie Gordon, executive director of Wild American Shrimp of Mt. Pleasant, S.C., the marketing arm of the Southern Shrimp Alliance. "Personal and business lines of credit have been stretched to cover the costs of repairs from the storms. Rebuilding the lost infrastructure is largely on the shoulders of family-owned 
companies that were struggling 
due to dumped imports before 
the storms."

Assessing the damage remains an ongoing task, says Ralph Hode, coordinator of the Emergency Disaster Grant program for the Gulf States Marine Fisheries Commission. Hode says the goal is simple: Get back to work.

"We're all trying to recover to the extent that we'll become productive again," says Hode.

However, to meet that goal, the federal government decided its CDBG funds should be geared exclusively to restore marine resources and not to fishermen who lost 
their livelihood.

Rex Caffey, an associate professor at Louisiana State University in Baton Rouge, says protecting the resource is a long-term strategy, if not a popular one.

"The good news for the oyster industry is that of the federal grant money released, even though it's not direct assistance, they'll benefit indirectly from those funds," says Caffey. "Without federal aid, they'd have to restore their own reefs."

Caffey estimates that frontline losses - damage to boats, docks and other industry infrastructure - incurred in Louisiana alone exceed $500 million. Yet the total aid for the entire Gulf Coast seafood industry was just under $127 million: $37 million for Mississippi; $3 million for Texas; $4 million for Florida; $29 million for Alabama; and Louisiana, which bore the full brunt of the category-5 Katrina, got nearly $53 million.

"On an industry level, I'd say the people who by sheer luck weren't damaged will do well," Caffey says. "It's a cruel roll of the dice. But it doesn't mean the market value of their shrimp will go up, because it's a global market."

Gordon says interest in domestic shrimp has been steadily increasing, but cannot say what portion of that demand was a result of the storms.

"While it takes a long time to recover from the unprecedented nature of the hurricanes, the shrimp industry remains optimistic as it finds new markets," he says.

Planning for the future

Nobody can control Mother Nature. What the Gulf seafood industry seeks instead is a way to prevent future financial losses caused by natural disasters and to be less dependent on government aid, if and when another strikes. Oyster farmers in Louisiana, the nation's top oyster-producing state at approximately 250 million pounds (in shell) annually, are now taking matters into their own hands by pursuing a group crop insurance plan.

However, a key question remains: Will the federal government assess and insure oyster crops the same way as land-based agricultural products like wheat, corn and soybeans? Robert Cerda, a crop insurance expert with 25 years of experience, says the industry will soon find out.

"Katrina drove home the idea that it's nuts not to have crop insurance, because [oyster farmers] got absolutely clobbered," says Cerda, president of Crop Insurance Systems of Olathe, Kan.

Cerda has been working with Louisiana and Mississippi oyster farmers since April 2005 to design a group insurance plan similar to those available to farmers of agricultural products. But Cerda, who is working without a contract and will not get paid if the indemnity system he's devised isn't accepted, says getting this program through Congress is no slam-dunk.

"Oysters are the most unique commodity I know of," Cerda says. "Every other [agricultural product] I'm aware of has at the very least 
the backstop of the Farm Service Agency's non-insured disaster program. Oysters don't."

On Nov. 15, Cerda and other oyster industry reps met with the Federal Crop Insurance Board of Directors to show them how the proposed program complies with law. If it passes an expert review, which could take 60 days, the plan could be marketed as early as spring 2007.

To gain approval, the insurance plan must pass two tests: it must provide value to the producers and have an actuarial rate. In other words, the premium charges for the insurance must be sufficient to cover the losses. But Cerda admits that oyster cultivation presents an unusual hurdle for insurance.

"Insuring crops is mostly about, 'Let me see your crops so I can see what happened,'" he says. "But there are two barriers with oysters: One, you can't see the crop, and two, in the event of a loss, an insurance company would not accept the situation of putting an inspector in scuba gear."

With underwater oyster crops essentially invisible to the naked eye, he says, an historical index is necessary for crop-loss insurance claims. The group insurance plan would mete out indemnities based on an oysterman's expected landings, an average of the past three seasons or share of the average oyster production in a given water basin. If harvesters choose to insure their crops, they select a coverage level ranging from 90 percent to 65 percent of the expected landings.

It's not a flawless system: The plan doesn't cover a new oysterman, for instance, and provides no individual assurance of an oyster harvest.

"The advantage [of a group plan] is the payment scheme is already put together. There's no mystery," Cerda says. "The downside is if an oyster producer suffers an individual loss, say a change in the concentration of salt in the water or predators come and take only their oysters or a disease breaks out and it affects only their crop, there's no indemnity."

After witnessing the damages caused by Hurricane Katrina, an 
affordable group insurance program is just what the industry needs, 
says Mike Voisin, VP of Motivatit Seafoods in Houma, La., and 
chairman of the Louisiana Oyster Task Force.

"It lets us work in the realm of modern-day banking," Voisin says. "Does it solve all our problems? No. One of the challenges that fishermen face in getting a loan is having an insured vessel as collateral. It's often prohibitive to purchase insurance, but without it they can't get loans to fix their boats. A lot of the seafood community is uninsured or underinsured."

Clean bill of health

In August, as the one-year anniversary of Hurricane Katrina's land-
fall approached, U.S. Commerce Secretary Carlos M. Gutierrez declared that the region's seafood supply showed no signs of elevated contaminants, toxins or pathogens. In fact, most seafood samples taken by NMFS were considered clean just two weeks after the storm.

"That's great news for the Gulf Coast fishing industry, which represents one-fifth of our nation's 
commercial fishery production, and for all of us who enjoy seafood," Gutierrez said.

Fish stocks also responded well, and the overall abundance of shrimp and bottom fish in early 2006 had increased 30 percent from 2004 levels.

"A little 'Bubba Gump bounce' was going on," says Barisich. "Those who were able to go back fishing did well, because for two-and-a-half months nobody touched 'em. The crop was ripe for the pickin'."

Yet the domestic shrimp industry still faces an uphill battle. Supplies from this year's shrimp harvest, nearly double last year's, are keeping prices down. Competition with cheaper 
imports is also taking a toll. And 
the massive infrastructure damages still make it difficult to get shrimp 
to market.

Silver linings may be few, but Hurricane Katrina did force the industry to rethink before it rebuilds. Industry veteran Don Schwab, whose family has worked in seafood for generations, is starting a new Gulf shrimp processing business in Independence, La., with Katrina close in mind.

Schwab's state-of-the-art, 35,000-square-foot refrigerated facility will be set further inland for increased shelter from winds and floods. Instead of sitting on the shore, DoRan Sea-Pak will be located about 45 miles east of Baton Rouge. Employing more than 100 people, it should be up and running by the May shrimping season.

"[Katrina] made you look at life differently; [it was] a big awakening," Schwab says. "I think it's affected everybody along the Gulf Coast. There was so much devastation."

The calls for help continue. Anne Milling, founder of Women of the Storm, whose members, families and businesses were affected by Hurricanes Katrina and Rita, took a contingency of 130 members to Washington, D.C., in September to appeal to Congress to visit the region and witness the remaining devastation.

"[It was] an urgent request to experience what the lens cannot reveal, what the auditor cannot calculate and what the heart cannot feel without setting foot on the ground and touching the people," says Milling.

The Louisiana Oyster Task Force is working with the Louisiana Recovery Authority to launch a "Back to the Dock" program to cover farmers' uninsured losses, similar to the CDBG funds that were made available to New Yorkers after 9/11. On Nov. 2, Voisin requested an additional $50 million from the LRA for Louisiana oystermen because, he says, there's simply too much at stake.

"The industry could lose generations, young people who won't be there in the future," Voisin says. A 
decision on the request is expected this month.

Obstacles remain for an embattled Gulf Coast seafood industry that only seeks a return to normal. Yet a full recovery seems almost certain considering the resolve and resiliency of its people.

"We've been challenged in recent years by the global marketplace, and now is the time to see what changes need to be made," says Smith of the LSPMB. "Quality will be the major push in the next few years, because we can compete on quality."

Assistant Editor James Wright can be 
e-mailed at jwright@divcom.com